BP PLC's plan to shrink its oil and gas production by 40% in the next 10 years will force the supermajor to amplify upstream divestments as it sheds its most carbon-intensive assets and accelerates its transition into an integrated energy company, analysts and company executives said.

"BP has set out ambitious targets for the realignment of its business within five- and ten-year time frames. An overhaul of this scale will require significant movements in the M&A market if it is to be delivered in the targeted timeframe," Will Scargill, managing oil and gas analyst at analytics firm GlobalData, wrote in an Aug. 5 note.

London-based BP plans to high-grade its asset base, refocusing its oil, gas and refining portfolio — the foundations of its once core business — to be more resilient in the coming years, BP Executive Vice President of Strategy and Sustainability Giulia Chierchia said during the company's Aug. 4 second-quarter earnings call.

"In terms of its traditional oil and gas segment, BP will need to offload assets that are not high-grade to hit its targets of improving returns on capital from a reduced asset base. Assets most likely to be put on the market are legacy positions with little growth potential," Scargill said.

BP's organic production is set to flatline through 2025 and then decline by 2030, Raymond James energy analyst Pavel Molchanov said in an Aug. 6 email. Together with asset sales, volumes in 2030 are expected to be 40% below 2019 levels. Analysts said BP could put noncore assets in Angola, Iraq and the United Arab Emirates up for sale. However, Molchanov said it is too early to determine which holdings the company might put on the auction block.

"Because this will be a decade-long process, the pace of asset sales will be done opportunistically based on market conditions. It is much more important to get the deals done right rather than simply sell something for the sake of selling something. It is too early to predict which specific assets will be sold," Molchanov said.

BP will complete all existing projects but will not explore for oil in any new countries, executives said during the call. BP's oil and gas production is expected to fall from 2.6 million barrels of oil equivalent per day in 2019 to 1.5 million boe/d by 2030 and its refinery throughput volumes are likely to drop from 1.7 million barrels per day to around 1.2 million bbl/d in the next 10 years.

"These [production decline] numbers do not include our shareholding in Rosneft, which is a fundamental part of our broader portfolio, providing us with a strong position in Russia," Chierchia said.

Chierchia made it clear that BP will retain its 19.75% stake in Russia's largest crude oil producer Public Joint Stock Company Rosneft Oil Co., known as Rosneft, which comprises a sizeable chunk of nearly 30% of BP's total production profile.

BP also remains committed to its U.S. onshore oil and gas shale business, known as BPX Energy. The unit, formed after BP's $10.5 billion acquisition of holdings from BHP Billiton Group at the end of 2018, represented BP's return to the unconventional exploration and production space.

"BPX remains core to the business and continues to do really well," BP CFO Murray Auchincloss said during the call.

"The cash generated by hydrocarbons will be key to supporting the transition into our two growth areas: low-carbon electricity and energy, and customer convenience and mobility. And we expect to be directing 40% or likely more of our investment into these areas by 2030," BP CEO Bernard Looney said during the call.

Despite the recent oil price collapse, BP has proceeded with several asset divestitures in the last few months, agreeing to sell its global petrochemicals unit to INEOS Ltd. for $5 billion, a deal that allowed BP to reach its initial $15 billion asset sale target a year earlier than initially scheduled.

In July, BP inked a deal to sell its interests in the Andrew Area in the central U.K. North Sea and its nonoperating stake in the Shearwater field to Premier Oil PLC. In the last few years, major companies in the U.S. and European oil space have been dumping aging North Sea assets to focus on other, more cost-effective areas.

Also in July, BP exited another noncore market, completing the sale of its upstream business in Alaska to Hilcorp Energy Company for $5.6 billion. The deal included BP's entire upstream and midstream business in Alaska, comprised of BP Exploration (Alaska) Inc., which held all of BP's upstream oil and gas interests in Alaska, as well as BP Pipelines (Alaska) Inc.'s interest in the Trans Alaska Pipeline System.